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Japan, Hong Kong Indexes Slip
As Exporters Fall on U.S. Data

By

Chris Oliver

Updated March 27, 2007 6:08 a.m. ET

Asian-Pacific stock markets closed mostly lower Tuesday, with export-related shares pressured after weak U.S. new-home sales raised concern that economic growth could be slowing in the region's most important export market.

Tokyo issues were also pressured in the first day in which many shares traded without year-end dividend entitlements.

Volatile trade sent Japan's Nikkei 225 average down 0.9% to 17365.05. About 90% of Nikkei 225 constituents were to go ex-dividend from Tuesday, accounting for about 90 points of the decline in the Japanese benchmark, according to Yoji Takeda, head of Asian equity management at RBC Investment Management Asia.

"In terms of settlement, today is the first day of the new fiscal year," the banker said. "We are also seeing some switching out of slower moving stocks; volume is pretty thin, so the market tends to be volatile."

Among major regional exporters, shares of South Korea's Samsung Electronics fell 0.7%, while
Canon
fell 0.5%.

Hong Kong's Hang Seng Index ended 0.3% lower at 19706.79.

"The market had built up overly optimistic expectations for a soft-landing scenario" in the U.S. economy, said Sean Darby, head of regional strategy at Nomura Securities in Hong Kong. "The credit problems are going to be much longer-term for the housing market; it's not allowing inventory to clear, and this is going to be a persistent problem for the U.S. economy going over the next six months."

Mr. Darby said a slowing U.S. housing market doesn't bode well for Asian exporters. They could see demand for their products crimped by slowing U.S. growth as homebuilders slash new-home construction and falling prices make it harder for consumers to finance consumption by taking equity out of their homes. "I don't think there is any evidence the housing market is out of the woods," he said.

China's Shanghai Composite Index reversed a shaky start to set an intraday record of 3135.23, bolstered by gains in banking and utility shares. Shanghai-listed shares of China Merchants Bank rose 1.1%.

Shares of
Nippon Steel
NSSMY -0.30%
rose 1.2% after the Nikkei daily reported that the world's second-largest maker of the alloy is holding talks with India's Tata Steel to jointly produce automotive-use steel sheet in India. That deal could be valued at as much as &yen;50 billion and the move reportedly would make Nippon Steel the first large Japanese steel maker to enter the Indian market.

Shares of
Konica Minolta Holdings
4902 -2.78%
rose 1.1% after the company said it had formed a tie-up with General Electric to develop paper-thin lighting equipment using organic electroluminescent-illumination technology. The Nikkei daily said commercial products from the project could be available within three years.

In currency trading, the U.S. dollar recovered to &yen;118.20 Tuesday in Tokyo, compared with &yen;118.07 late Monday in New York and &yen;118.31 late Monday in Tokyo. The home-sales data affected the dollar, which fell against major currencies Monday.